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This Toronto Tax Accountant has urgent advise heading into the last week of 2015. Here are some important and time sensitive tax tips to note. I will summarize, one tip as it applies to corporate tax planning for small and medium size businesses and another for the owners of those businesses.

 

Changing tax rates

Important for owner-managed small and medium sized businesses. I as a Toronto Tax Accountant and a qualified CPA will annually advise private business owners how much money and in what form (dividend vs. salary) to take money out of their companies.

The new liberal government has adjusted tax rates with varying effects all depending on the tax bracket you fall into. If you are in the $45-$90K income bracket then your federal rate will drop by 1.5%, however if your income is in excess of $200K then your rate will be rising by 4%. Therefore if there is an opportunity for your accountant to shift income around between 2015 and 2016 this should be considered. All being equal, middle bracket earners should shift more income in 2016 and higher bracket earners should try to maximize the amount of income they take out of their companies in 2015,

 

Realizing losses

If you are holding securities, outside of a registered investment plan, that are trading lower than the purchase price and you are not overly optimistic of a short to medium term turnaround you may want to sell those stocks and realize a loss before the year’s end. These losses (the difference between the original purchase price and the net proceeds on disposition) are called capital losses and can off-set capital gains incurred in the current year, the 3 immediate prior years or against any future capital gains earned, indefinitely. If you do not sell and realize the losses before the year’s end these losses may be lost and you will not seize the opportunity to shelter taxes on your capital gains. Alternatively, if you wait and only realize losses at some point in 2016 you will need to wait a whole year to reap the rewards by sheltering capital gains taxes.

Keep in mind that if you sell your securities (to realize a loss in 2015) you have to wait at least 30 calendar days to repurchase the specific security sold otherwise the loss will be deemed a superficial-loss and the capital loss will be denied.

 

More important December 31 deadlines (if you want to be able to use the deductions or credits on your 2015 return):

 

-Charitable donations/political contributions

-Investment counsel fees, interest and other investment expenses

-Certain child and spousal support payments

-Deductible legal fees

 

For more advise related to this topic or other corporate and personal tax matters give us a call. I am a qualified CPA and Toronto Tax Accountant, I am ready and keen to discuss great tax planning strategies for you and your business.